CapitalatWork

Our attitude towards investing in the stock market is different from what is practiced by many investors. We stress the importance of “being in the market” as opposed to “timing the market”. The opportunity for investors that are not blindsided by short-term market movements, is enormous. Warren Buffett stated it like this in one of his famous quotes: “In the short run the market is a voting machine, in the long run it is a weighing machine”. Understanding this quote is important. It means that it is extremely difficult to predict the near future. Who knows what the stock market will do next year, or where interest rates or currencies will trade. Building an investment strategy on trying to “time the market”, on looking to the market as a voting machine, is extremely dangerous.

This is illustrated below. It shows that if you miss the best 17 months in equity in the period 1985-2005, your return would be approximately the same as that of an investment in US T-Bills!

click here to enlarge

Our attitude towards investing in the bond market is also different from what is practiced by the majority of investors. We do incorporate “Time at Work” (turn into hotspot) as one of the hallmarks of our fixed income investments. Our strategy is built on looking to the market as a weighing machine. We value superior businesses, and history shows that in the long run the returns of the companies we invest in, simply reflect the realized free cash flows and the future growth of those free cash flows. In the long run the market will inevitably recognize the free cash flows realized by the companies we invest in.